<PAGE>
 
================================================================================


                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549



                                   FORM 10-Q
                                        

              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF

                                        

                      THE SECURITIES EXCHANGE ACT OF 1934

                                        

               FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

                       COMMISSION FILE NUMBER    0-19600

                                        


                                        
                                   CORE, INC.
             (Exact name of registrant as specified in its charter)



           MASSACHUSETTS                                 04-2828817
 (State or other jurisdiction of                     (I.R.S. Employer
  incorporation or organization)                    Identification No.)



         18881 VON KARMAN AVENUE, SUITE 1750, IRVINE, CALIFORNIA 92612
              (Address of principal executive offices) (zip code)



      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (714) 442-2100
                                        


   Indicate by check "X" whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes   X    No 
                                                ---      ---        



  On November 7, 1997, there were 7,286,419 shares of the Registrant's Common
                               Stock outstanding.
<PAGE>
 
                                   CORE, INC.
                                   FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 1997

                               TABLE OF CONTENTS
                                        

                                                                        Page
                                                                        ----
PART I  FINANCIAL INFORMATION

Item 1. Financial Statements

        Consolidated Condensed Balance Sheets                            3

        Consolidated Condensed Statements of Operations                  5

        Consolidated Condensed Statements of Cash Flows                  6

        Notes to Consolidated Condensed Financial Statements             7

Item 2. Management's Discussion and Analysis of Financial 
         Condition and Results of Operations                             9

PART II OTHER INFORMATION

Item 1. Legal Proceedings                                               N/A

Item 2. Change in Securities                                            N/A

Item 3. Defaults Upon Senior Securities                                 N/A

Item 4. Submission of Matters to a Vote of Security Holders             N/A

Item 5. Other Information                                               N/A

Item 6. Exhibits and Reports on Form 8-K                                12

Signatures                                                              13

<PAGE>
 
                                   CORE, INC.
                                        
                     CONSOLIDATED CONDENSED BALANCE SHEETS

                                        
<TABLE> 
<CAPTION> 
                                                  DECEMBER 31,    SEPTEMBER  30,
                                                     1996             1997
                                                    (NOTE 1)       (UNAUDITED)
                                                  -----------------------------
<S>                                               <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents                       $ 4,281,994     $ 3,467,129
   Cash pledged as collateral                          192,000
   Investments available-for-sale                    8,435,531       4,856,723
   Accounts receivable, net of allowance 
    for doubtful accounts of $221,925 at 
    December 31,1996 and $160,433 at
    September 30,1997                                4,545,738       5,456,459
   Notes receivable from officers                      106,926         105,645
   Prepaid expenses and other current assets           891,932         564,255
                                                   ---------------------------
Total current assets                                18,454,121      14,450,211

Property and equipment, net                          6,445,420       6,542,326
Deposits and other assets                              699,901         577,007
Goodwill, net of accumulated amortization 
 of $87,400 at December 31, 1996 and 
 $233,552 at September 30, 1997                      2,035,604       8,673,589
Other intangibles, net                                 208,693         642,636
                                                   ---------------------------
Total assets                                       $27,843,739     $30,885,769
                                                   ===========================
</TABLE>
                                                                                
See accompanying notes.

                                       2
<PAGE>
 
                                   CORE, INC.
                                        
                CONSOLIDATED CONDENSED BALANCE SHEETS - CONTINUED
                                        
<TABLE> 
<CAPTION> 
                                                  DECEMBER 31,    SEPTEMBER  30,
                                                     1996             1997
                                                    (NOTE 1)       (UNAUDITED)
                                                  ------------------------------
<S>                                                <C>             <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                $    743,143    $    646,077
    Accrued expenses                                   1,200,323       1,426,690
    Accrued payroll                                      465,520         158,400
    Accrued restructuring costs                           41,636
    Deferred income taxes                                 68,316          68,316
    Notes payable                                         58,099          60,700
    Obligation from acquisition                                        1,125,000
    Current portion of obligations to 
     former shareholders                                  50,000          50,000
    Current portion of capital lease obligations          46,498          40,839
                                                    ----------------------------
  Total current liabilities                            2,673,535       3,576,022

  Long-term obligations to former shareholders,
    net of current portion                                50,000
  Note payable                                           256,690         209,782
  Capital lease obligations, net of 
    current portion                                       37,275           6,339
  Deferred rent, net of current portion                  220,539         189,297
  Deferred income taxes                                  149,500         149,500

STOCKHOLDERS' EQUITY
Preferred stock, no par value, authorized 500,000 
  shares; no shares outstanding 
Common stock, $0.10 par value per share; 
  authorized 30,000,000 shares; issued and 
  outstanding 7,172,711 and 7,275,965 at 
  December 31, 1996 and September 30, 1997,
  respectively                                           717,271         727,597
Additional paid-in capital                            34,465,146      34,845,446
Deferred compensation                                    (38,640)       (38,640)
Cumulative unrealized gain on investments
  available-for-sale                                      31,983          8,538
Accumulated deficit                                  (10,719,560)    (8,788,112)
                                                    ----------------------------
Total stockholders' equity                            24,456,200     26,754,829
                                                    ----------------------------
Total liabilities and stockholders' equity           $27,843,739    $30,885,769
                                                     ==========================
</TABLE> 

See accompanying notes.

                                       3
<PAGE>
 
                                   CORE, INC.
          CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
 
                                                        THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                            SEPTEMBER 30,                      SEPTEMBER 30,
                                                         1996           1997                1996           1997
                                                 --------------------------------------------------------------------
<S>                                              <C>              <C>              <C>                <C>
Revenues                                           $7,460,262      $10,531,319        $20,603,169      $27,629,939
Cost of services                                    4,538,792        6,152,346         12,325,764       16,843,247
                                                 -------------------------------------------------------------------
Gross profit                                        2,921,470        4,378,973          8,277,405       10,786,692

Operating expenses:
     General and administrative                     1,584,502        2,091,029          4,483,418        5,956,582
     Sales and marketing                              337,892          663,979          1,236,383        1,791,257
     Non-recurring write-off of AmHealth              
       Acquisition Costs                            2,029,555                           2,029,555
     Depreciation and amortization                    323,663          533,835            891,230        1,424,207
                                                 -------------------------------------------------------------------
         Total operating expenses                   4,275,612        3,288,843          8,640,586        9,172,046
                                                 -------------------------------------------------------------------
Income (loss) from operations                      (1,354,142)       1,090,130           (363,181)       1,614,646
Other income (expense):
 Interest income                                      118,277          122,707            193,035          464,724
 Interest expense                                     (21,273)          (6,538)           (66,684)         (18,661)
 Realized gain on sale of investments
  available-for-sale                                                                       16,003
 Other income                                                              250                481              250
                                                 -------------------------------------------------------------------
                                                       97,004          116,419            142,835          446,313
                                                 -------------------------------------------------------------------
Income (loss) before income taxes                  (1,257,138)       1,206,549           (220,346)       2,060,959
Provision for income taxes                                             (98,144)                           (129,144)
                                                 -------------------------------------------------------------------
Net income (loss)                                 ($1,257,138)      $1,108,405          ($220,346)      $1,931,815
                                                 ===================================================================
Net income (loss) per common share:
 Primary                                               ($0.21)           $0.14             ($0.04)           $0.25
                                                 ===================================================================
Fully diluted                                          ($0.21)           $0.14             ($0.04)           $0.24
                                                 ===================================================================
</TABLE> 

See accompanying notes.

                                       4
<PAGE>
 
                                   CORE, INC.
          CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE> 
<CAPTION> 
                                                NINE MONTHS ENDED SEPTEMBER 30,
                                                -------------------------------
                                                     1996             1997
                                                -------------------------------
<S>                                             <C>              <C>
OPERATING ACTIVITIES:
Net income (loss)                               $   (220,346)     $  1,931,815
Adjustments to reconcile net income (loss) 
 to net cash provided by (used in)
 operating activities:
   Depreciation                                    1,037,790         1,225,074
   Amortization                                                        632,314
   Realized gain on sale of investments 
    available-for-sale                               (16,003)
   Decrease in obligations to former 
    shareholders                                    (372,666)
   Changes in operating assets 
    and liabilities:
     Increase in accounts receivable              (1,929,208)         (910,721)
     (Increase) decrease in prepaid 
       expenses and other current assets            (840,026)          105,306
     Increase (decrease) in accounts 
       payable and accrued expenses                  534,391          (331,138)
                                                ------------------------------ 
Net cash provided by (used in) 
  operating activities                            (1,806,068)        2,652,650

INVESTING ACTIVITIES:
  Additions to property and equipment             (3,168,926)       (1,401,074)
  Additions to goodwill                             (176,119)
  Decrease in cash pledged as collateral             106,000           192,000
  Purchases of investments 
    available-for-sale                           (17,085,027)      (31,886,685)
  Sales of investments available-for-sale          5,284,467        35,442,048
  Decrease (increase) in notes receivable 
    from officers                                    (72,095)            1,281
  Payments for acquisitions, net of 
    cash acquired                                                   (5,697,703)
  Additions to intangible assets                                      (500,000)
  Decrease in deposits and other assets                8,140           122,894
                                                ------------------------------ 

Net cash used in investing activities            (15,103,560)       (3,727,239)
 
FINANCING ACTIVITIES:
  Payments on notes payable                         (155,994)          (44,307)
  Payments on capital lease obligations              (56,591)          (36,595)
  Payments on obligations to 
    former shareholders                             (379,084)          (50,000)
  Proceeds from issuance of common stock          16,351,379
  Issuance of common stock upon exercise 
    of stock options and warrants                    251,575           390,626
                                                ------------------------------ 

Net cash provided by financing activities         16,011,285           259,724
                                                ------------------------------ 
Net decrease in cash and cash equivalents           (898,348)         (814,865)
Cash and cash equivalents at 
  beginning of period                              1,005,807         4,281,994
                                                ------------------------------ 

Cash and cash equivalents at end of period      $    107,464      $  3,467,129
                                                ==============================
 
Supplemental disclosure of cash 
  flow information:
    Interest paid                               $     35,803      $     16,509
                                                ==============================
Noncash investing activities:
    Obligations incurred in connection 
      with the purchase of SSDC                                   $  1,125,000
                                                ==============================
</TABLE>

See accompanying notes.

                                       5
<PAGE>
 
                                   CORE, INC.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                               SEPTEMBER 30, 1997
                                        

Note 1 - Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission, but do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.  The balance sheet at December 31, 1996 has been derived
from the audited financial statements of CORE, INC. (the "Company") at that
date.

In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have been
included.  Operating results for the three and nine month period ended September
30, 1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997.  For further information, refer to the
consolidated financial statements for the year ended December 31, 1996 contained
in the Company's annual report filed on Form 10-K (File #0-19600) with the
Securities and Exchange Commission on March 28, 1997.

Note 2 - Earnings Per Share

In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods.  Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded.  The impact of Statement 128 on the calculation
of primary and fully diluted earnings per share is not expected to be material.

Note 3  Business Acquisitions

On June 25, 1997, a  wholly-owned subsidiary of the Company purchased certain
assets and liabilities of Social Security Disability Consultants  and Disability
Services, Inc. (collectively, "SSDC") for an initial purchase price of
$6,500,000, additional performance related cash payments and stock options.
Cash payments of $5,375,000 have been made as of September 30, 1997.  Additional
payments of $1,125,000 and performance based payments of up to $920,000 are
payable through June 1999.   SSDC provides disability management services with
two key areas of business: social security disability benefits advocacy and
Medicare coordination of benefits.  The acquisition has been accounted for as a
purchase.

The pro forma unaudited results of operations for the nine months ended
September 30, 1996 and 1997, assuming consummation of the purchase as of January
1, 1996, are as follows:

<TABLE>
<CAPTION>
                                           Nine months ended September 30,
                                       --------------------------------------
                                             1996                   1997
                                       --------------------------------------
<S>                                    <C>                   <C>
Revenues                                $29,308,383           $31,022,879
Income before extraordinary item            771,631             3,422,615
Net income                                  771,631             4,466,765
Earnings per common share
   Income before extraordinary item             .12                   .43
   Net income                                   .12                   .56
</TABLE>

On July 31, 1997,  a wholly-owned subsidiary of the Company purchased certain
assets and liabilities of Protocol Work Systems, Inc. ("PWS") for $75,000 cash,
assumption of $125,000 of PWS' liabilities and stock options.  The acquisition
has been accounted for as a purchase.  Pro forma results of operations have not
been presented because the effect of this acquisition was not significant.

                                       6
<PAGE>
 
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
--------------------------------------------------------------------------
RESULTS OF OPERATIONS.
--------------------- 

OVERVIEW

     The Company provides managed disability services (which consist of the
Company's WorkAbility/TM/ program, bill audit services, analytic consulting,
social security disability benefits advocacy and Medicare coordination of
benefits), specialty physician and behavioral health review services and health
care benefits utilization review and case management services. These services
are provided principally to self-insured employers, third-party administrators
and insurance carriers. The Company is typically compensated for these services
either on a per review (i.e., per case), hourly or per enrollee basis. The
managed disability service line also includes a limited amount of revenue (1%
for the nine months ended September 30, 1997) from licensing fees attributable
to license grants by the Company of the medical protocol portion of the
WorkAbility software program.

     This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
the Company's actual results could differ materially from those contemplated by
such statements.  Such statements reflect management's current views, are based
on many assumptions and are subject to risks and uncertainties.  Some important
factors the Company believes could cause such results to differ include the
company's reliance on its WorkAbility program, the Company's dependence on key
clients, risks associated with the Company's growth strategy, increases or
changes in government regulation and competition.  The foregoing list of factors
are not intended to represent a complete list of the general or specific risks
that may affect the Company.  It should be recognized that other risks may be
significant, presently or in the future.

CURRENT DEVELOPMENTS

     On April 14, 1997, CORE announced that the Company formed a strategic
alliance with Reed Group, Ltd., to develop a new generation of products designed
to better help employers manage their disability and workers' compensation
costs.  Reed Group, based in Denver,  publishes disability duration guidelines.
The guidelines entitled The Medical Disability Advisor, Workplace Guidelines for
Disability Durations are marketed in text, software, and license forms and are
currently used by more than 7,000 companies.

     On June 25, 1997, CORE announced that the Company purchased certain of the
assets of Social Security Disability Consultants and Disability Services, Inc.
(collectively, "SSDC").  SSDC, based in Novi, Michigan, is a disability
management services firm with two key areas of business: social security
disability benefits advocacy and Medicare coordination of benefits for Fortune
500 employers and others.  The transaction was an asset purchase and has been
accounted for under purchase accounting rules.  Consideration included cash
payments, future guaranteed payments, performance based payments and stock
options.

     On July 31, 1997 the Company purchased the assets and certain liabilities
of Protocol Work Systems, Inc., a small Massachusetts based provider of job
analysis, employee physical abilities testing and other loss prevention services
to the workers' compensation market.

                                       7
<PAGE>
 
RESULTS OF OPERATIONS

   The following table sets forth certain statement of operations data for the
periods indicated expressed as a percentage of revenues:

<TABLE>
<CAPTION>
 
                                     Three months ended            Nine months ended 
                                        September 30,                 September 30,
                                ----------------------------------------------------------
                                     1996          1997           1996            1997
                                ----------------------------------------------------------
                                    Percent       Percent       Percent         Percent
                                ----------------------------------------------------------
                                                  (Dollars in thousands)
<S>                                 <C>          <C>           <C>            <C>
Revenue                              100.0%       100.0%        100.0%         100.0%
Cost of services                      60.8         58.4          59.8           61.0
Gross profit                          39.2         41.6          40.2           39.0
General and administrative 
  expense                             21.2         19.9          21.8           21.6
Sales and marketing expense            4.5          6.3           6.0            6.5
</TABLE>

   The following table sets forth the contribution to total revenues of each of
the Company's principal service lines for the periods indicated:

<TABLE>
<CAPTION>
                                                    Three months ended September 30,          Nine months ended September 30,
                                             ---------------------------------------------------------------------------------------

                                                     1996                1997                  1996                  1997
                                             ---------------------------------------------------------------------------------------

                                               Amount    Percent    Amount     Percent    Amount    Percent    Amount     Percent
                                             ---------------------------------------------------------------------------------------

                                                                            (Dollars in thousands)
<S>                                          <C>        <C>        <C>        <C>        <C>       <C>        <C>       <C>
Managed disability services                   $3,520      47%      $ 6,345      60%      $ 8,441     41%       $15,018     55%
Specialty physician and behavioral
   health review                               2,226      30         2,479      24         6,770     33          7,522     27
Utilization review and case management         1,714      23         1,707      16         5,392     26          5,090     18
                                             --------------------------------------------------------------------------------------
                                              $7,460     100%      $10,531     100%      $20,603    100%       $27,630    100%
                                             ======================================================================================
</TABLE>


Managed disability services include: CORE's WorkAbility services, analytic
consulting, social security disability benefits advocacy, Medicare coordination
of benefits, bill audit services, job analysis and loss prevention services and
license fees.

Three and nine months ended September 30, 1997 and 1996

      Revenues.  Revenues for the three months ended September 30, 1997
increased by $3,071,000 (41%) from $7,460,000 in 1996 to $10,531,000 in 1997.
For the nine months ended September 30, 1997 revenues increased $7,027,000 (34%)
from $20,603,000 in 1996 to $27,630,000 in 1997.  Growth in managed disability
services contributed $2,825,000 (92%) of the Company's growth in revenue for the
three months ended September 30, 1997 and now includes revenues from the
recently completed acquisitions of SSDC and Protocol Work Systems. An increase
in the volume of referrals resulted in increased revenues realized from
specialty physician review services, growing 11% for the three and nine month
periods ended September 30, 1997, as compared to the prior year.  Revenues from
utilization review and case management services remained constant for the three
month period ended September 30, 1997 and decreased 6% for the nine month period
ended September 30, 1997, as compared to the prior year, as a result of a
decline in enrollment in our clients' indemnity plan based group health
business.  The Company expects utilization review and case management revenues
to continue to decline as  compared to prior year levels.

      For the nine months ended September 30, 1997, the Company's top five
clients represented 41% of revenues compared to 32% for the same period last
year.  Bell Atlantic accounted for approximately 23% of revenues for the nine
months ended September 30, 1997.  No other single client represented more than
10% of total revenues for the nine months ended September 30, 1997 or 1996.

      Cost of services.  Cost of services for the Company include direct
expenses associated with the delivery of its review and managed care services,
including salaries for professional, clerical and license support staff, the
cost of physician reviewer consultants and telephone expense. Cost of services
for the three months ended September 30, 1997 increased $1,614,000 (36%) from
$4,539,000 in 1996 to $6,152,000 in 1997. Cost of services for the nine months
ended September 30, 1997 increased $4,517,000 (37%) from $12,326,000 in 1996 to
$16,843,000 in 1997.  The increase is primarily the result of additional payroll
costs associated with business acquisitions completed in June and July, 1997 and
increased staffing levels required to service new and growing WorkAbility
clients and growth in the Company's specialty physician review services.  

                                       8
<PAGE>
 
CORE's gross profit performance of 39% for the nine months ended September 30,
1997 was relatively consistent with gross profit levels of 40% realized in the
prior year. The Company's gross profit performance during the three months ended
September 30, 1997 improved to 42% as compared to 39% for the quarter ended June
30, 1997. This improvement was due to continued growth in our managed disability
service line, which historically has generated a higher margin. A one-time
billing contributed to higher gross profit in the utilization review and case
management service line. The gross profit for the utilization review and case
management service line is typically lower than the Company's overall margin and
that trend is expected to continue.

      General and administrative expenses.  General and administrative expenses
include the cost of executive, administrative and information services
personnel, rent and other overhead items.  General and administrative expenses
for the three months ended September 30, 1997 increased $507,000 (32%) from
$1,585,000 in 1996 to $2,091,000 in 1997.  General and administrative expenses
for the nine months ended September 30, 1997 increased $1,473,000 (33%) from
$4,483,000 in 1996 to $5,956,000 in 1997.  Expenses increased, in part, due to
additional staffing in the information services area to support the growth of
the Company. Higher costs in rent, insurance costs, equipment rental and other
general and administrative expenses relate primarily to the Company's Silver
Spring, Maryland operating center that opened in July 1996, the expansion of
space in the Company's  Burlington, Massachusetts facility in early 1997, and
the acquisitions of SSDC and Protocol Work Systems in June and July, 1997.

      Sales and marketing expenses.  Sales and marketing expenses include, but
are not limited to, salaries for sales and account management personnel and
travel expenses. Sales and marketing expenses also include costs designed to
increase revenues, such as participation in and attendance at industry trade
shows and conferences. Sales and marketing expenses for the three months ended
September 30, 1997 increased $326,000 (97%) from $338,000 in 1996 to $664,000 in
1997.  Sales and marketing expenses for the nine months ended September 30, 1997
increased $555,000 (45%) from $1,236,000 in 1996 to $1,791,000 in 1997.  The
increase is primarily due to increased staffing to support the marketing and
product development departments. The Company's sales and marketing strategy has
historically focused the efforts of an industry known senior management team and
a smaller sales and marketing staff on fewer but significantly larger sales
prospects.   The Company has maintained this approach, however the Company has
also has added staffing to increase its distribution sales effort which is aimed
at intermediaries, e.g., insurance companies and third party administrators
("TPAs"), who provide sales leverage and access to companies with 1,000-5,000
employees, thereby, broadening the Company's target market.  Additionally, a
focused sales effort has been initiated during the third quarter to take
advantage of the recent acquisitions of SSDC and Protocol Work Systems. The
Company believes that a unique opportunity exists to cross sell each company's
products and services. The Company expects to invest an increased amount of
resources in sales and marketing in future periods.

      Depreciation and amortization expense.  Depreciation and amortization
expense for the three months ended September 30, 1997 increased $210,000 (65%)
from $324,000 in 1996 to $534,000 in 1997.  Depreciation and amortization
expense for the nine months ended September 30, 1997 increased $533,000 (60%)
from $891,000 in 1996 to $1,424,000 in 1997.  The increase is largely
attributable to increased depreciation expense on assets purchased for the
operating center in Silver Spring, Maryland to service the Bell Atlantic
Corporation contract as well as increased amortization expense on goodwill due
to the purchases of SSDC and Protocol Work Systems, Inc.

      Other income.  Other income consists primarily of interest income, which
represents amounts earned by the Company on investments held, as reduced by
interest expense.  Other income for the three months ended September 30, 1997
increased $19,000 (20%) from $97,000 in 1996 to $116,000 in 1997.  During the
nine months ended September 30, 1997, other income increased $303,000 (212%)
from $143,000 in 1996 to $446,000 in 1997.  The increases are due to an increase
in funds available for investment following the public offering in August 1996
and the Company significantly reducing its use of its line of credit.


FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     For the nine months ended September 30, 1997, the Company's cash and cash
equivalents decreased by $815,000. For this period, operating activities
provided $2,655,000 due to net income of $1,931,000 and depreciation and
amortization of $1,857,000 as offset by an increase in accounts receivable of
$911,000.  The Company's investing activities used $3,730,000 of cash due
primarily to the Company's funding of $5,000,000 for the purchase of SSDC
through the sale of investments held.  The Company's financing activities
provided $260,000 for this period due primarily to the proceeds from the
exercise of common stock options.

     The Company leases its facilities and certain office equipment.  Lease
commitments, which relate substantially to 

                                       9
<PAGE>
 
space rental, for the quarter ended December 31, 1997 and the year ended
December 31, 1998 are approximately $550,000 and $2 million, respectively. All
obligations held by the Company under lease commitments expire on various dates
through April 2002 and total $5.5 million as of September 30, 1997.

     The Company has net operating loss carryforwards for income tax purposes of
approximately $6 million as of December 31, 1996, which can be used to reduce
future obligations for federal and state income taxes.  The amount of net
operating loss carryforwards that can be utilized in any future year are limited
due to "equity structure shifts" in 1995 involving "5% shareholders" (as these
terms are defined in Section 382 of the Internal Revenue Code), which resulted
in a more than 50 percentage point change in ownership.  The utilization of
these net operating loss carryforwards may be subject to further limitation
provided by the Internal Revenue Code of 1986 and similar state provisions.

     The Company plans to finance its operations and working capital
requirements with the proceeds from the August 1996 offering, earnings from
operations, investments on hand and other sources of available funds.  The
Company presently believes that these resources will be sufficient to meet its
liquidity and funding requirements through at least the year 1998.

                                       10
<PAGE>
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.
-------  -------------------------------- 

(a)  Exhibits.  The following exhibits are included:

Exhibit
Number  Description
------  -----------

10.1*   CORE, INC. 1997 Stock Option Plan, including forms of stock option
        agreements.

11*     Statement re: Computation of Income (Loss) Per Share for the three and 
        nine months ended September 30, 1997 and 1996.

27*     Financial Data Schedule

_______________________________
* Filed herewith


(b)  Reports on Form 8-K.
     ------------------- 

     The Company filed a report on Form 8-K on July 15, 1997 and a related Form
8-K/A (Amendment No. 1) on September 3, 1997, which reported the acquisition by
a wholly-owned subsidiary of the Company of certain assets of Social Security
Disability Consultants Limited Partnership and Disability Services, Inc.
(collectively "SSDC").  SSDC, based in Novi Michigan, is a disability management
services firm with two key areas of business: social security disability
benefits advocacy and Medicare coordination of benefits for Fortune 500
employers and others.

The Report on Form 8-K/A (Amendment No. 1) included the audited combined balance
sheets of Social Security Disability Consultants Limited Partnership, Disability
Services, Inc., DSI-Medicare Consultants, Inc., and Diamond Entertainment, Inc.
as of December 31,1996, 1995, and 1994 and the related combined statements of
operations, retained earnings, partners' capital and cash flows for the years
then ended and the compiled combined balance sheets of Social Security
Disability Consultants Limited Partnership, Disability Services, Inc., DSI-
Medicare Consultants, Inc., and Diamond Entertainment, Inc. as of June 24, 1997
and June 30, 1996 and the related combined statements of operations, retained
earnings, partners' capital and cash flows for the six month periods then ended
and unaudited pro forma combined condensed statements of operations for the
twelve months ended December 31, 1996 and the six months ended June 30, 1997..

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<PAGE>
 
                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                         CORE, INC.



Dated:  November 14, 1997                By:  /s/ William E. Nixon
                                             -----------------------------
                                              William E. Nixon
                                              Chief Financial
                                              Officer, Executive
                                              Vice President and Treasurer
                                              (Duly authorized officer and 
                                              Principal Financial Officer)

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